The United States and its military partners are reaching for new tools to counter an unconventional ''three warfares'' strategy that China is using to advance aggressive territorial claims, says a Pentagon report.

It says the People’s Liberation Army is using what it calls ''legal warfare'', ''media warfare'' and ''psychological warfare'' to augment its arsenal of military hardware in order to weaken the resolve of the US and its regional partners to defend islands and oceans in the East and South China Seas.

''They have introduced a military technology which has not previously been considered as such in the West,'' says the report, China: The Three Warfares, which was commissioned by the Pentagon’s most senior strategist, Andrew Marshall, and circulated to leaders of the US Pacific Fleet. This technology has ''side-stepped the coda of American military science,'' it says.

The report’s warnings of China’s use of ''coercive economic inducements'' and other non-traditional methods underscores Prime Minister Tony Abbott’s challenge in balancing economic and security interests, as he prepares to meet China’s President Xi Jinping at the Great Hall of the People on Friday night.

This week Mr Abbott signed a landmark agreement to develop military technology with China’s arch-rival, Japan, while Australian business leaders joined a forum at Bo’ao that was initiated by representatives of a PLA ''influence'' platform, as revealed last year by Fairfax Media.

A co-author of the Pentagon report: Australian Rear Admiral James Goldrick.

The three warfares stratagem is rooted in ancient Chinese strategies of ''perception warfare'' as well as the Communist Party’s origins as an underground and guerrilla organisation. It was modernised and codified by the PLA’s top brass a decade ago but appeared to escape serious Western military attention until China began to adopt a far more muscular stance over its contested borders from 2009.

Some well-placed Western defence strategists question the efficacy of Chinese ''three warfares'' and broader ''political warfare'' strategies, saying efforts to intimidate have been counterproductive and that military contests will continue to be determined by traditional capabilities.

But the lead author of the report, Stefan Halper, told Fairfax Media that Western military strategists had been slow to respond because they were unduly fixated with the PLA's traditional military hardware.

The Australian delegation to the Bo'ao Forum 2012 meets their People Liberation Army hosts.

''We really shouldn’t regard this as the cutting edge of China’s military capacity because our capacity is simply so much better than theirs,'' said Professor Halper, a former White House official who is director of American studies in the department of politics and international studies at the University of Cambridge. ''You’ve got to appreciate the power of vested interests in these large military systems,'' he said. ''China's unique political warfare is a much more serious threat because it’s not something we’ve thought a great deal about.''

The report recommends an arsenal of unconventional and costless tools and measures that can puncture China’s ability to propagate ''false narratives'' and ''bogus'' legal claims.

Its recommendations are directly reflected in the Pentagon’s highly unusual decision to release the in-house report, after minor redactions and months of deliberation.

''It took a lot of time for Andrew Marshall and the Department of Defence to release that report,'' says one of the authors, Peter Mattis, a fellow at the Jamestown Foundation in Washington DC. ''As I understand the argument for releasing the report, publicising it was the only way you can deal with the political warfare challenge,'' he said.

The report says one successful ''counter-measure'' was pioneered by the Australian coast guard vessel Oceanic Viking to overcome false information during confrontations with Japanese whaling vessels in 2008.

''It used to be very easy to craft a story that places yourself as the victim,'' said Rear Admiral James Goldrick, who headed Australia’s Border Protection Command at the time, and also contributed to the Pentagon report. ''If everything is filmed, however, and you behave badly, then it will be instantly obvious.''

The Three Warfares

The report notes China’s success in framing a fatal collision as being the fault of an American ''spy plane'' in 2001 with a similar naval incident in 2009 when the US promptly released video footage that ''demonstrated the falsity of China’s version'' of events.

''The advent of videos and mobile phones, and a so-called YouTube effect have rendered such quick propaganda exercises vulnerable,'' says the Pentagon report.

Western policymakers are also countering perceived Chinese aggression with public advocacy, including Mr Abbott's controversial decision in November to publicly protest China's unilateral declaration of an air defence information zone over the East China Sea.

In recent weeks senior US policymakers have for the first time pledged to alter America’s defence ''posture'' if China attempts a similar zone in the South China Sea.

They have also publicly rejected China’s apparent but ambiguous claim to the 1 million square kilometres of water encompassed by what is known as ''the nine dash line'', leading China to accuse the US of destabilising the conflict.

''If the US sincerely wants to safeguard peace and stability in the region, it should faithfully honour its commitment of not taking sides,'' said a Chinese diplomat this week, according to Xinhua.